Plan the 2019 IRPF statement before the end of the year

Tips to reduce your tax bill in the personal income tax of 2019.

We include below a series of warnings on certain aspects of the Income Tax of Natural Persons that we can take into account before the end of the year to save on the declaration that we will present next year.

All this, without prejudice to the specific characteristics approved by the Autonomous Communities and the regional regulations and which must be taken into account by tax residents in these territories.

Deferral of income to fiscal year 2020

Although, there will be no reduction in tax rates, it may be interesting for you to defer income to the year 2020. This is not possible, in many cases, but you can afford it to obtain certain types of returns.

Thus, if it depends on your choice that you recognize a return on movable capital in the last days of 2019 or in the first of 2020, you can choose the second option to defer the generation of income the following year.

The same is true, with the returns on real estate capital in which you can anticipate some expenses that will necessarily be incurred, and that may be interesting as long as the income exceeds the expenses.

Regarding the returns of economic activities determined in the direct estimation regime, you may be interested in postponing the last sales to the first days of 2020 or anticipating expenses in the last days of 2019.

Replacement of monetary income with certain income in kind

Even if at this point you can not do so, by 2020 if you work for someone else you may be interested in agreeing with your company the replacement of monetary income for certain income in kind that they do not pay, such as transport cards, restaurant tickets, programs training, childcare tickets, medical insurance for the worker, his spouse and descendants or the delivery of shares or participations of the company itself or of group companies up to 12,000 euros.

One of the exempt payments in kind that is usually used is the provision of the dining room service through indirect formulas, such as restaurant tickets, food vouchers or similar documents, cards or any electronic means of payment that are delivered to the worker up to nine euros daily The exempt amount is eleven euros a day.

Another exemption in kind exempt, transport vouchers, have a limit of 136.36 euros per month per employee and its scope of spatial validity must take into account the locations corresponding to the residence and the workplace of the employee.

For the worker the delivery by his company of nursery tickets is exempt when the established requirements are fulfilled, without limitation in its amount.

The amount of the remuneration for exempt work in kind derived from the premiums paid by the employer to health insurance for the worker, the spouse or their descendants is 500 euros per year per person and when this is a person with a disability, 1,500 euros, annual.

If you have the possibility that your company gives you a vehicle as remuneration in kind, you will be interested, also from the fiscal point of view, that it is energy efficient, since it can reduce in its valuation as income in kind up to 30% of your assessment.

Determination of the performance of economic activities

If you determine the net return on your economic activity by the simplified direct estimation regime and wish to waive it or revoke your resignation by 2020, do not forget that you can do so during the month of December. Said waiver or exclusion of the simplified direct estimate would result in all taxpayer’s economic activities being determined by the normal direct estimation modality for 3 years, tacitly extending the waiver except revocation.

Keep in mind that the simplified modality in direct estimation applies to all economic activities exercised by taxpayers, when the net amount of the turnover of all their activities in the previous year does not exceed € 600,000 per year, unless waived, and when the performance of some other economic activity of the taxpayer in the normal modality of direct estimation or in objective estimation is not determined.

Also, if the determination of the net performance is carried out by applying the objective estimation regime and you want to give it up or revoke your resignation by 2020, do not forget that you can do so during the month of December. Said waiver would imply automatic inclusion in the simplified mode of the direct estimation scheme, unless the limit of € 600,000 of income is exceeded or they also waive the simplified mode, in which case they will calculate the performance in the normal mode of the estimate direct, so now is the time to compare your results in direct estimation and objective estimation

Remember that the method of objective estimation of returns for certain economic activities applies to taxpayers who do not exceed certain exclusion figures provided that they do not determine the net return of any economic activity by the direct estimation method

The magnitudes that exclude its application are a volume of total returns in the immediately preceding year that exceeds for the whole of its economic activities, except agricultural, livestock and forestry, 150,000 euros per year or 250,000 euros per year for all its activities agricultural, livestock and forestry and a volume of purchases of goods and services, excluding fixed assets purchases in the previous year exceeding 150,000 euros per year.

People close to turning 65

If you are going to turn 65 soon and you have in mind to transmit your usual home, and you know that a capital gain will be produced, or constitute a reverse mortgage on it, you may want to wait to reach that age and that the gain is thus exempted that occurs. If the dwelling were a property of profit and one of the spouses has not reached that age, it can be compensated to postpone the operation until both have reached 65 since, otherwise, the spouse under 65 must pay in half of the capital gain. For the same reason, if you are close to 65 years of age, and you have assets or rights that you want to sell to supplement your retirement and with which you expect to obtain a capital gain, you may want to wait until you have that age and, with the amount obtained by the sale, constitute a life annuity of a maximum of 240,000 euros in a period of six months from the sale, and thus not to pay for the corresponding capital gain. If the profit has been generated in 2019 and will constitute an annuity within six months of the sale, but in the year 2020, you must communicate your intention in the income tax return for the year 2019.

Reinvestment of capital gains

Apart from the exemption for reinvestment for people over 65 years of age that we have just mentioned, there is a possibility that certain capital gains will not be taxed.

Thus, capital gains that are evidenced on the occasion of the transfer of shares or participations of newly created companies for which the deduction for investment or subscription of shares or participations in new or recent companies would have been made would be excluded from encumbrance creation (which we will discuss later), provided that the total amount obtained by the transmission of the same is reinvested in the acquisition of shares or participations of said entities. If the amount reinvested is less than the total received, the proportional part corresponding to the reinvested is excluded from taxation.

Equity gains obtained by the transfer of the taxpayer’s habitual residence would also be excluded, provided that the amount obtained by the transfer is reinvested in the acquisition of a new habitual residence within two years of the transfer (both the preceding ones and the later). In this way, the payment of the tax for the surplus value of the sale could be neutralized. If you have transmitted your habitual residence in 2019 and you plan to reinvest the amount obtained in the acquisition of a new one and do not do so in the year 2019, you must communicate your intention in the income tax declaration corresponding to said year.

Long Term Savings Plan and PIAS

If you plan to hire a deposit, you may be interested in contracting before the end of the year a Long-Term Savings Plan (either an Individual Long-Term Savings Insurance – SIALP- or an Individual Long-Term Savings Account -CIALP-) if He plans to keep the amounts he imposes on it in 2019 for at least 5 years. In that case, it will not pay for the profitability that it produces as long as the tax per year does not exceed 5,000 euros, that it does not withdraw any amount before the end of 2024 and that the rescue is in the form of capital.

If you are the owner of an Individual Systematic Savings Plan (PIAS) and five years have passed since the first contribution, you can rescue it to constitute an annuity with exemption from the profitability generated. Remember that the maximum annual limit paid in premiums is 8,000 euros.

Capital reduction with return of contributions

In the event that during 2019 capital has been reduced with return of contributions, or an emission premium has been distributed in an unlisted company, a possible option that should be assessed would be the distribution of dividends before the end of the year, due to that the subsequent distribution of dividends up to these amounts is not taxed, but decreases the value of the shares to the limit of the yield of computed movable capital when the capital reduction was made with the return of contributions.

Public aid

You should remember, that if you have received any type of public assistance during 2019, this is taxed in your personal income tax for the year in which it is perceived as capital gain. However, if the aid received is as compensation for the structural defects of construction of the habitual residence and is intended for the repair of the same, it can be charged by fourth parties, in the tax period in which they are obtained and in the three following. Therefore, the exercise of this option may allow you to defer taxation.

Contribution to social welfare systems

One of the most frequent ways of saving taxes is the contribution to social security systems such as pension plans and funds or mutual funds that allow the reduction of the tax base, with limits.

The maximum contribution that allows the reduction to be applied is 8,000 euros per year, regardless of the age at which the contribution is made, with a limit of 30% of the sum of the net income from work and economic activities.

However, people whose spouse does not obtain net income from work and / or economic activities, or are less than 8,000 euros per year, can contribute to the spouse’s plan up to a maximum of 2,500 euros per year with the right to reduction.

Moreover, in disability pension plans, the limits are as follows:

• For the contributions of the person with disabilities, the maximum is 24,250 euros.

• For contributions made by relatives in a straight or collateral line until the third grade, the amount cannot exceed 10,000 euros.

The sum of the contributions made by the disabled person and their relatives cannot exceed 24,250 euros.

In relation to the rescue of benefits, after the reform of the Personal Income Tax Law, the possibility of applying the 40% reduction for the rescue in the form of capital of contributions made before 2007 is maintained, although only if it is taken out the money in the year in which the insured contingency occurs or in the following two years, so if the contingency that gives rise to the collection of the benefit has occurred or will occur in 2019, you must collect the benefit in the form of capital at the latest until December 31, 2021. When deciding when to proceed to the rescue, you must take into account the other income that goes to the general base, which also adds to the rescue to determine the average tax rate , so it is convenient to do it when the total income is lower.

Those who retired in 2017 or for which any of the insured contingencies would have occurred in said year, must remember to rescue their savings in the form of capital during 2019 to apply the reduction. It should also take into account that a transitional regime is foreseen for contributions made before 2007, in cases where the contingency occurred prior to the entry into force of the Tax reform, on January 1, 2015. Thus , if the contingency that allows the rescue occurred in 2011 and you want to benefit from a 40% reduction in the benefit received in the form of capital, you must proceed to the rescue before December 31, 2019. If it took place from 2012 to 2014, the collection of the benefit must be done before the end of the eighth year following the contingency.

Take advantage of income compensation

In case you have had in 2019 capital gains by transfer of assets, you can reduce the cost of personal income tax by transferring other assets in which you have latent losses, by subtracting the losses from the gains. Otherwise, having obtained capital losses, you can take advantage to reduce the taxation of profits that you can generate before the end of the year, transmitting assets in which you have capital gains.

In the event of having had in some previous year some negative balance caused by the transfer of assets and it has not been more than four years since it was generated, it will be appropriate to generate capital gains before the end of the year, in order to minimize taxation through compensation of negative balances.

The positive returns that make up the savings part, such as those from interest or dividends, in 2019 can be reduced with the negative balance of the integration of capital gains and losses originated by transmissions, up to a maximum of 25% of those. The remaining negative balance may compensate, within four years, the positive from these returns that go to the savings part.

Possibility of applying deductions related to housing

From the deduction for investment in habitual housing, a star measure to reduce the fee to be paid in the personal income tax, many taxpayers still benefit. Therefore, if you purchased it before January 1, 2013 or made any payment on account for its construction, it can be reduced up to 15% of the amounts invested, with a maximum limit of 9,040 euros, and provided that you have applied such deduction for housing in 2012 or previous years. In that case, if you have not yet exceeded that limit, do not forget to consider the savings that can be made to make an extraordinary amortization, provided that your family economy allows it, maximizing the deduction applied. On the other hand, and without taking into account the rest of the factors, beyond the prosecutors, it is not convenient for you to fully repay the loan that was used to finance your acquisition.

If you live in a leased dwelling, you may continue to practice the missing deduction for rental of habitual dwelling if you had rented said dwelling before January 1, 2015 and had previously deducted it, when your tax base is less than 24,107, 20 euros per year. The deduction consists of 10.05% of the amounts paid in the tax period, with the maximum base also being 9,040 euros, when the tax base is equal to or less than € 17,707.20 per year and € 9,040 less the result of multiplying for 1,4125 the difference between the tax base and € 17,707.20 per year, when the tax base is between € 17,707.20 and € 24,107.20 per year. Therefore, by abstraction from the rest of the circumstances, it is in that case not to change your home, extending the contract, or even signing a new one with modifications, to continue enjoying the deduction.

Possibility of applying deductions related to investment in newly or newly created companies

The investment or subscription of shares or participations in newly or newly created companies is also entitled to deduction in the 30% quota, provided that a series of requirements are met, both in terms of the investment made, and in terms of entities in whose shares or participations the investment materializes.

The base of the deduction is formed by the acquisition value of the subscribed shares or shares, being the maximum base of € 60,000 per year.

The participation must remain at least three years and a maximum of twelve years in the capital of the new company and must not exceed 40% of its capital, which also must not have more than 400,000 euros in own funds.

Membership fees and contributions to Political Parties and fees paid to trade unions and professional associations

Keep in mind that the membership fees and contributions of its affiliates, members and supporters to Political Parties, Federations, Coalitions or Groups of Voters are entitled to a deduction of 20%, being the maximum basis for the deduction of 600 euros per year. Likewise, the fees paid to unions and professional associations are considered deductible expenses for the determination of work income, when the membership is mandatory to provide the labor services that the collegiate provides to their employer, in the part corresponding to the essential purposes of these institutions, and with the limit of 500 euros per year.

Improvement in the deductibility of donations

If you need to lose the fee to pay your personal income tax in solidarity, you still have time. Remember that the first 150 euros of donations made to the beneficiary entities of the patronage, will be entitled to a deduction of 75%, the amount that exceeds that amount will be entitled to an additional deduction of 30%, and, in order to reward the usual, who has donated during the two previous years to the same entity an amount equal to or greater than that of the previous year, above this 150 euros per year, benefits from a deduction of 35%. As you can see, it is interesting to make increasing contributions to the same entities, as the percentage of deduction increases.

Obligation to declare

They are exempt from the obligation to declare, taxpayers who obtain capital gains derived from public aid of reduced amount (less than 1,000 euros per year together with income derived from Treasury Bills and subsidies for the acquisition of protected or appraised housing), income full of movable capital and capital gains subject to withholding or deposit on account that do not exceed 1,600 euros per year, work income exceeding 22,000 euros and 14,000 eruos when the income from work comes from more than one payer, in the event that the payer is not obliged to withhold and for when they receive income subject to fixed rate of retention, or compensatory pensions or annuities for non-exempt food.

Reminders

• If you have an apartment and want to rent it, keep in mind that it will be more convenient to rent it as permanent housing than as an office or vacation rental, in order to apply a 60% reduction in net income.

• If you are going to transfer assets or rights acquired before December 31, 1994, keep in mind that you can only apply the old depletion coefficients that reduce the capital gain obtained to those that come from transmissions whose value does not exceed, in an accumulated way, more than 400,000 euros.

• If you have traveled abroad for work reasons without losing your tax residence, keep in mind that the income you have received for work actually performed abroad may be exempted from the maximum limit of 60,100 euros per year, when certain requirements are met.

• If you are an entrepreneur or professional and travel for work reasons outside the domicile of your activity, you can deduct the living expenses incurred by the taxpayer in the development of your activity, provided that, in addition to having a direct relationship with it, They are produced in catering and hospitality establishments and are paid using any electronic means of payment, with the daily limit of the same amounts established for exempted allowances for employees. That is, in general, 26.67 euros per day if the expenditure occurs in Spain or 48.08 euros if it is abroad. If, in addition, as a result of the displacement it is overnight, these quantities are doubled.

• If you taxpayer determines the net performance of your economic activity by the objective estimation regime and you want to give it up or revoke your resignation by 2020, you can do so from the moment the Order approving the modules for 2020 through 31 is published in the BOE December 2019, through the census declaration, so now is the time to compare your results in direct estimation and objective estimation.

• The amount obtained by the transfer of the subscription rights from securities admitted to a tax contribution as equity gain for the transferor, subject to withholding of 19%, instead of reducing the acquisition value of the securities as was the case until now when no It was taxed.

• If you receive income in a foreign country, keep in mind that in the personal income tax you have to pay for your worldwide income, therefore you must include such income.

• If you obtain income from economic activities and determine your performance in direct, normal or simplified estimation, the health insurance premiums paid by the taxpayer for your coverage and that of your spouse or children under 25 years of age living with him are deductible expenses , with the limit of € 500 per year for each person and € 1500 in the event that the taxpayer, his spouse or minor children are disabled.

• If you obtain returns for economic activities that you carry out at your own address, and determine your performance in direct estimate, remember that those derived from the ownership of the home as depreciation, the IBI, the interest, the rate of income garbage insurance or the community of owners depending on the square meters allocated to the activity in proportion to those of the house and the expenses of supplies of said house, in the percentage resulting from applying 30% to the proportion existing between the meters squares of the house destined to the activity with respect to its total area, unless a higher or lower percentage is tested.

• If you are fond of online gambling, as the computation of the losses and capital gains obtained are established globally, you should prove your losses, to pay only for the net profits.

• If you must file the declaration of assets and rights abroad after the deadline, you can avoid the penalty by including, before being required for it, the value of the assets and rights declared as equity gain not justified in the corresponding complementary declaration of personal income tax.

• If you have the right to collect the unemployment benefit and you are going to start a professional activity as a self-employed worker or as a working partner of an associated worker cooperative or labor society, you should request payment of the benefit in the single payment modality. In this way you will not pay for it, as long as you do not cease the activity initiated during the following 5 years or keep the shares or participations during the same period.

• Remember that there is a time limit for the rescue of social security system benefits in the form of capital with a 40% reduction for contributions made before 2007, depending on the time at which the insured contingency occurred.

• If you have been fired from your company and the compensation has been exempt, (remember that if it is mandatory, you do not pay up to the limit of € 180,000) keep in mind that if within three years you are rehired for the same or for another linked to it, loses the exemption and must submit a complementary statement including the amount of compensation.

• If you have transferred your habitual residence in 2019 or if you have obtained a capital gain being over 65 years and you will proceed to reinvest the amount obtained in the acquisition of a new one in a different year, you must communicate your intention in the income tax declaration from the 2019 exercise.

• If you are over 65 years of age, you have obtained a capital gain in 2019 and will constitute a life annuity within six months of the sale, but in the year 2020, you must communicate your intention in the income tax return for the year 2019 .

• If you are thinking of transferring shares of an investment fund that will generate capital gains, do not forget that transfers between investment funds are not taxed and tax payments may be deferred until the final. reimbursement.

• If you are lucky in a lottery prize, having raised the exempt amount of the special tax on the prizes of certain lotteries and bets, being for 2019 the exempt amount of 20,000 euros and by 2020 of 40,000.

• If you have children under three years of age and pay for custody expenses in authorized childcare centers or nursery schools, know that the maternity deduction has been increased by 1,000 euros, taking into account custody expenses the amounts paid for the pre-registration and enrollment , assistance, general and extended hours, and food, provided they have been produced for full months and are not considered exempt in kind income

• Large families are entitled to a deduction of 1,200 euros per year if they are general -from three children- or 2,400 euros if they are of a special category, from five, and up to an additional 600 euros per year can be deducted for each child that exceeds the minimum necessary to enter each category.